On 5 December 2022, the Department of Health and Social Care opened a consultation proposing various changes to the NHS pension regulations, of which some of these will be welcomed by high earning NHS dentists.
The major proposed change to be aware of is with regards to how inflation will impact Pension Input Amount (PIA) on the Pension Savings Statement (PSS1) from 2022-23 onwards. PIA is calculated as the difference between the opening value of your pension as of 6 April and the closing value as of the following 5 April. At the moment, both the opening and closing values are adjusted by inflation but as the inflationary measure used in these calculations are referenced at different points of the year, this causes larger increases in PIA in years where inflation rises during the year.
The proposal on the consultation is that the date that yearly in-service revaluation is applied is moved from 1 April to 6 April. The effect is that the same CPI percentage rate is used in both the opening and closing value and PIA will therefore only consider growth in pension savings above inflation.
Ultimately, this should see lower PIA for dentists for 2022-23 and lower or no pension annual allowance tax charges for that year.
The other change for dentists is a proposal for dentists to be able to identify what their Net Pensionable Earnings (NPE) were for 1 April 2022 to 30 September 2022 before the change in pension rates and tiers and another NPE figure for 1 October 2022 to 31 March 2023 under the new pension rates.
The impact for dentists will depend on when their NPE was earned.
If the proposals are accepted, then it shouldn’t cause any major changes for most dentists in what they pay into their pension scheme for 2022-23, although this will cause some dentists to pay more in or less in depending on the timing of their NHS income in the year compared with an even split between the two periods.
This will however come at an administration expense as the NPE will now need to be calculated for both periods in the year and Compass will need to be updated to accommodate this proposal.
If you are interested in reading through the consultation and responding to it, the document can be found here.
The consultation will be closing for comments on 30 January 2023.